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Module3HWSol

# Module3HWSol - 0.0745/4 – 1 = 1.88 d Effective semiannual...

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Module 3 Chapter 2 D3 Total amount of interest = \$175,000 - \$150,000 = \$25,000 Interest each year = \$25,000 ÷ 4 = \$6,250 Annual interest rate = \$6,250 ÷ \$150,000 = 0.0417 = 4.17% D4 Year Loan Balance Interest Accrued 1 \$85,000 × 1.045 = \$88,825 \$88,825 \$85,000 = \$3,825 2 \$85,000 × 1.045 2 = \$92,822 \$92,822 \$85,000 = \$7,822 3 \$85,000 × 1.045 3 = \$96,999 \$96,999 \$85,000 = \$11,999 4 \$85,000 × 1.045 4 = \$101,364 \$101,364 \$85,000 = \$16,364 5 \$85,000 × 1.045 5 = \$105,925 \$105,925 \$85,000 = \$20,925 D6 a) Effective monthly interest rate = 6.25% ÷ 12 = 0.521% b) Effective quarterly interest rate = (1 + 0.00521) 3 1 = 1.57% c) Effective semiannual interest rate = (1 + 0.00521) 6 1 = 3.17% d) Effective annual interest rate = (1 + 0.00521) 12 1 = 6.43% D9 a) Effective daily interest rate = e 0.0745/365 1 = 0.02% b) Effective monthly interest rate = e 0.0745/12 1 = 0.62% c) Effective quarterly interest rate = e

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Unformatted text preview: 0.0745/4 – 1 = 1.88% d) Effective semiannual interest rate = e 0.0745/2 – 1 = 3.80% e) Effective annual interest rate = e 0.0745 – 1 = 7.73% D14 Effective annual interest rate of first investment = . Effective annual interest rate of second investment = . The first investment is better. D15 Effective annual interest rate of first loan = 7.35 . Effective annual interest rate of second loan = . The first loan is cheaper. A4 Effective annual interest (1 st local bank) = Total interest (1 st local bank) = Effective annual interest (2 nd local bank) = The loan from the first local bank is cheaper. A5 Total interest if loan is paid off after 1 year = EUR54.2M × 1.0575 – EUR54.2M = EUR3.117M Total interest if loan is paid off after 2 years = EUR54.2M × 1.0575 2 – EUR54.2M = EUR6.412M The company will save EUR6.412M – EUR3.117M = EUR3.30M...
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